HOUSTON, Texas – A Texas oilfield equipment and services company posted a massive $1.5 billion loss for the fourth quarter of 2015 due to the crash in oil prices.
National Oilwell Varco (NOV), a Houston based company, reported on Wednesday that revenues decreased by 60 percent for the quarter and the company recorded $1.63 billion in pre-tax impairment charges, according to a Houston Chronicle article by Jordan Blum.
The fourth quarter losses capped a year where the company fell from a profit of $2.5 billion in 2014 to an annual loss of $767 million for 2015. Total revenue for the year decreased by 33 percent.
Falling oil prices have hit this company particularly hard. “Tumbling oil prices brought capital austerity and sharply lower oilfield activity, which is intensifying as we enter 2016,” said Clay Williams, NOV chairman, president and CEO. “We are well positioned to take advantage of the opportunities we expect to emerge during 2016.”
Tudor, Pickering, Holt & Co., an analyst, called the earnings report “much worse than we expected.” They said the 4th quarter reports clearly show the fragility of the exploration and production sector of the oil industry.
In his prepared statement, Williams said the “lower-for-longer” nature of current oil prices will eventually cause demand to grow and provide a platform for recovery for his company.
“We nevertheless recognize that the timing of the recovery remains uncertain and that we face additional headwinds in the year ahead,” the NOV CEO stated. “We remain resolute in our focus on reducing costs, improving execution, doing more with less and, ultimately, emerging from the depths of this cycle well positioned for the upturn.”
The sharp drop in the company’s earnings were not unexpected. On Monday, the Motley Fool financial website predicted the company’s falling revenues and profits would continue in its Q4 report:
Given that oil prices weakened during the quarter, investors can expect that this will push National Oilwell Varco’s revenue and earnings lower than last quarter. That’s something that CEO Clay Williams warned last quarter when he said that ‘the sharp decline in oil prices and activity since late last year has affected each of our segments, and will drive activity lower in the fourth quarter.’ That being said, the severity of the impact on earnings really boils down to how well the company managed its own costs during the quarter.
NOV is not alone in its financial troubles. Low oil prices have caused massive job cuts in the energy sector, as Breitbart Texas reported in January. Federal Reserve Bank senior economist Keith Phillips said Texas alone had lost 50,000 jobs due to falling oil prices.
The economist predicted that if oil continues to fall to the $20 – $30 per barrel range, the state’s job growth will turn negative. He said Houston may well bear the brunt of the economic slump. With a flash of optimism Phillips said, “But we are constantly surprised by oil prices. If they jump up past $60 and hold, Texas will likely return to growth above the national average.” He said Houston’s growth “flat lined” over the past year.
In December, Royal Dutch Shell announced it would shed nearly 3,000 jobs. Many of those job losses; however, were due to their recent acquisition of the BG Group.
NOV’s competitors, Schlumberger and Halliburton reported fourth-quarter losses of $1 billion and $28 million respectively.
The company announced earlier this week that it would cut 129 workers from its Houston facilities. It announced it is closing its North Houston manufacturing facility. The facility will remain closed until June. In November, the company announced cuts of 120 employees from a plant it was closing in San Angelo.
Bob Price serves as associate editor and senior political news contributor for Breitbart Texas and is a member of the original Breitbart Texas team. Follow him on Twitter @BobPriceBBTX.